The funds were used by the Russian borrower, a company, to facilitate acquisitions from the first defendant which was a British Virgin Islands company, owned and operated from Russia. The leading judgment was given by Lord Sumption, who observed that the law relating to the circumstances in which it would be permissible for the courts to pierce the corporate veil was characterised by “inadequate reasoning”. Thus momentarily suspending the separateness of the corporate structure to see what was happening behind the company, an “act of curiosity”. Prest v Petrodel Resources Limited and others [2013] UKSC 34. The first requirement of control was satisfied on this basis. The evasion principle on the other hand was when the people behind the company were using it separateness to evade a legal responsibility they themselves had personally. Usually the strict principle of independent corporate existence (Salomon v Salomon Co Ltd [1897] A.C. 22) is applied and the courts will regard the company as separate from its members and the veil will not be pierced. This article will critically evaluate the significance of the Prest v Petrodel Resources Ltd decision in light of the corporate veil doctrine. Trustor AB v Smallbone (No 2) [2001] EWHC 703 Although it is very rare that piercing of the corporate veil is allowed, there have been sporadic attempts by litigants to do so, such as in the Court of Appeal case (VTB Capital Plc v Nutritek International Corp and others [2012]), in which the claimant bank had provided US$225 million under a facility agreement. Therefore the issue of “piercing the corporate veil” never arose, even if the court wrongly proceeded this is in fact was happening. It is not an abuse to cause a legal liability to be incurred by the company in the first place. This article will critically evaluate the significance of the Prest v Petrodel Resources Ltd[1] decision in light of the corporate veil doctrine. Lord Sumption in the Supreme Court embarked upon a survey of the cases in this area in order to avoid the uncertainty and to discover the principle that underpins the “doctrine’s” invocation. By using the corporate structure and its separate legal personality they were trying to defeat their personal obligation. It intersects two main areas of A further net worth statement provided by the same accountant 16 months later also identified the Guarantor’s assets to include a “residence in Fulham” with a current value of US$3.2 million. The concept of the corporate veil, also known as the Salomon Principle, separate legal personality amongst other names,[2] was established in Salomon v Salomon[3]. For the court to pierce the veil the wrongdoer’s intentions may be considered, but in any case it must be shown that they controlled the company and used it as a facade to conceal their wrongdoing. Ottolenghi describes this as merely an”act of curiosity”, which is the “least offensive to the separate entity theory”. Lord Sumption[13] described “façade” and “sham” as “protean” terms. March 22, 2018/in Company /Private Law Tutor. Nor can the veil be pierced, where there is no unconnected third party, purely on the basis that to do so would be in the interests of justice. In certain cases group companies will not be treated as separate, which is contrary to the general principle. Salomon v Salomon [1896] UKHL 1. On the other hand the company Alamed Ltd was also a party to the specific performance on the evasion principle, and reference was made to the decision in Horne. However, there have been circumstances in which the courts have been prepared to “pierce the veil” of corporate personality to find the members of the company liable for company actions in certain circumstances. [8] Perhaps it can be argued that this is not even a doctrine, but a thing that all have struggled to categorise. The fifth, sixth and seventh defendant companies, each provided guarantees or security to the Claimant in respect of the loans. Both sides of the profession were affected differently. Piercing the corporate veil: a new era post Prest v Petrodel. It is important that the above six articulated principles, which result in the “piercing of the corporate veil”, only be used where all other, more traditional, were not suitable in the circumstances. Here it seems to me that the particular wrong which [the Guarantor] has done, is that he has mis-used the company as a device, in effect, or is now seeking to do that.” On this basis Mr Justice Eder found that the Claimant was entitled to a declaration that it could lift the corporate veil as far as the Property was concerned and that any judgment against the Guarantor could be enforced against the Property. Having obtained permission to serve out of the jurisdiction, the claimant was granted a worldwide freezing order against the fourth defendant, which the claimant alleged controlled the first and second defendants. This article examines the judicial approach to the corporate veil post-Prest v Petrodel Resources Ltd. [5] With this in mind, to pierce or lift the veil of incorporation would be to find the shareholders liable. The Court of Appeal decided that it would be contrary to principle and authority and therefore not appropriate to pierce the corporate veil to effect a contractual claim from the claimant against those alleged to be controlling the defendant companies, where those being pursued were not a party to that contract. The question of when the courts will be prepared to “pierce the corporate veil” and disregard Salomon has quizzed judges, lawyers and academics. Lord Sumption asserted however that the terms sham or façade should be replaced with ‘evasion’ and ‘concealment’. Patten LJ asserted that this practice “amounts almost to a separate system of legal rules unaffected by the relevant principles of English property and company law” and must cease. By classifying veil-piercing as evasion, his Lordship suggested that concealment cases were not truly veil-piercing. It will then examine how the old corporate veil cases have been reconciled. Although the Prest case does make it clear that veil piercing will only be appropriate where there has been evasion of liabilities and where no other remedy of law will provide an appropriate remedy, as shown above, the judgment gives no indication of precisely the circumstances in which the veil may still be pierced and thus the decision should be seen only as contributing further to the uncertainties … The courts have demonstrated that the veil will not be pierced where, despite the presence of wrongdoing, the impropriety was not linked to the use of the corporate structure as a device or facade to conceal or avoid liability, nor will the courts pierce the veil merely because the interests of justice so require (Adams v Cape Industries Plc [1990]). However, when relief was granted against the company this occurred under the evasion principle, and the corporate veil pierced. The tenth to sixteenth defendants are alter ego corporate vehicles of the third defendant, who directs and controls the actions of the companies. Only where it can be proved that the corporate structure is being used to conceal or avoid a liability will the protection ordinarily provided by the corporate veil be at risk. Family lawyers always get very excited about decisions handed down by the Supreme Court; after all, they don’t come very often. The eighth and ninth defendants, individuals, both provided guarantees in respect of the loan to the second defendant. Prest v Petrodel Resources Ltd UKSC 34 This is the key case where SC considered the issue of whether the court possesses a general power to pierce the corporate veil in the case where these specific legal principles do not apply. Another was to take funds from the companies whenever he wished, without right or company authority. Prest v Petrodel Resources Ltd & Others [2013] UKSC 34; [2013] All ER (D) 90 (Jun), is a landmark case which is of considerable interest to corporate and insolvency lawyers, as well as family lawyers. The case is of great significance. The value of the judgement was not in question, as the courts had already ruled the husband – a Nigerian oil tycoon – would have to pay his wife £17.5m, largely due to his conduct during the case, and he was not arguing over this. It will present the view the Law Lords had of the “doctrine” … The relatively short judgment in the United Kingdom Supreme Court case of Prest v Petrodel Resources Ltd1 (herein, Prest) has garnered vociferous interest from academics and practitioners. [25] However it was contended by Lord Clarke that the distinction between evasion, and concealment should not be adopted until such time until it was discoursed in the course of the argument. 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